Australian domestic airfares rise as airlines cut flights to ease pressure on industry


Australian domestic airfares increased significantly between April and August this year as airlines reduced capacity to manage staff shortages, and jet fuel costs climbed, the ACCC’s latest Airline Competition in Australia report reveals.

The quarterly report, released on 7 September, shows the cheapest economy airfares were 56 percent higher in August 2022 than they were in April 2022 when they hit an 11-year low. Business airfares rose by 17 percent between June and August.

“After about 18 months of historically low airfares, the cost of domestic flying has risen sharply in response to strong demand, temporary capacity reductions and very high jet fuel prices,” ACCC Chair Gina Cass-Gottlieb said. “Discount economy airfares in August were at their highest point in almost two years. In these circumstances, more than ever, the level of competition between airlines is incredibly important to maintain pressure on ticket prices and service levels across the industry.”

In July 2022, about 4.7 million passengers flew domestically, which was the highest number since the start of the pandemic, and 89 percent of the passenger volume in July 2019. July is a peak time for travel due to school holidays. In June 2022, the number of domestic airline passengers was 97 percent of the passengers in the same month in 2019.

Travel to Queensland was particularly popular in July 2022. The number of passengers flying between Canberra and the Gold Coast almost doubled compared to July 2019. Travel between the Gold Coast and each of Melbourne and Adelaide also surpassed pre-pandemic demand. “Pent up demand for leisure travel, particularly from people in the colder southern states, continues to drive the recovery in passenger numbers. Demand on routes between Canberra, Melbourne and Sydney has lagged behind, in part due to the slower recovery of corporate and business travel,” Cass-Gottlieb said.

The strong demand for travel created challenges for an aviation industry still rebuilding its workforce and dealing with high rates of illness. In July 2022, the domestic airline industry reported the worst on-time performance on record, and airlines cancelled flights at a rate over three times the long-term average. “We are aware that for many consumers, long awaited travel fell well short of expectations with record delays, very high rates of cancellations, lost baggage, and long wait times for call centres. We have been engaging closely with airlines to understand the source of these problems,” Cass-Gottlieb said.

Rex performed significantly better than the other airlines in terms of punctuality and the rate of cancellations. It attributed this success to keeping its staff despite reduced flying over the last two years. Airlines have advised the ACCC that on-time performance has improved more recently as rates of sickness have subsided, the aviation industry recruits more people, and the airlines reduce the number of scheduled flights. “We expect that airlines will be honest and proactive in communicating to passengers the reasons why a flight is delayed or cancelled, how the consumer guarantees apply, and what other compensation they are entitled to,” Cass-Gottlieb said.

The combination of high demand for travel and reduced capacity resulted in fuller flights. In July 2022, 82 percent of seats were filled, while many routes to northern Australia surpassed 90 percent. With such full planes, it has often been difficult for people to find available seats when their initial flight has been cancelled. Qantas, Virgin and Rex all increased their market share between April and July 2022 after winning passengers from Jetstar. The Qantas Group-owned Jetstar carried 23 percent of all domestic passengers in July, down from 28 percent in April. Qantas carried 39 percent of passengers in July, compared to 33 percent for Virgin and 5 percent for Rex.

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